Daily Commentary BY THE CURVE TEAM –

Trade Balance Bounces Bank

4th of June, 2021

The resurgence in Australia’s trade balance sends mixed messages

Australia’s trade balance recovered in April after sliding for two months from a near record high in January. The April trade balance was back up above 8bln in April, the fourth highest read on record. The underlying drivers behind the bounce in the trade surplus paint a slightly less positive picture.

Exports were strong once again with bulk commodities leading the way. Total exports were up 3% for the month with double digit gains in bulk commodities supported by an increase in rural good exports. Services exports remained largely unchanged.

Imports on the other hand were down by 4%. The big driver was sizeable declines in both consumer goods and capital goods with both falling by 5% from the prior month. Service exports managed to offset some of the decline, posting a 2% increase.

The long stretch of trade surpluses is providing a nice tailwind for the economy. What would be good to see is a sustained uplift in imports, especially consumer and capital goods. This would be seen as strong sign that underlying demand in the economy is trending higher.

After net exports provided a drag on growth in the first quarter, this is the first sign that it could provide an uplift to growth in the current quarter.

David Flanagan

Head of Money Markets